India’s fiscal deficit touched record levels of over Rs 6.62 lakh crore in the April-June quarter, 83.2 per cent of the target for the whole of the current fiscal year, reflecting the impact of the coronavirus pandemic on tax collections and as the government front-loaded its spending. The deficit is predicted by private economists to cross 7.5 per cent of GDP in the 2020-21 fiscal year beginning April, from initial government estimates of 3.5 per cent, due to a sharp economic contraction caused by the COVID-19 outbreak.
The economy is forecast to shrink 5.1 per cent in the current fiscal year, and 9.1% under a worst-case scenario, according to analysts in a Reuters poll, its weakest performance since 1979.
Government data released on Friday showed total net tax receipts in three months through June declined more than 46 per cent year-on-year to Rs 1.35 lakh crore, compared with Rs 2.51 lakh crore a year ago, even though taxes on fuel products have been increased.
The number of COVID-19 cases jumped to 1.64 million in India on Friday, while the death toll rose to 35,747.
Over three months, total expenditure rose 13 per cent year-on-year to Rs 8.16 lakh crore, compared with Rs 7.22 lakh crore a year ago, as the government increased spending on free foodgrains and rural jobs programmes for millions of migrant workers.
Economists said a more than two months-long lockdown since late March has hurt economic activity in Asia’s third largest economy, impacting tax collections and the government’s plans to raise revenue through privatisations of state-run companies.
The government has increased its market borrowings target to Rs 12 lakh crore for the current fiscal year, from earlier estimates of Rs 7.8 lakh crore, to fund the budgeted spending.